DoubleVerify trades at $20.56 and has moved in lockstep with the market. Its shares have returned 9.3% over the last six months while the S&P 500 has gained 13.5%.

Is DV a buy right now? Find out in our full research report, it’s free.

Why Does DoubleVerify Spark Debate?

When Oren Netzer saw a digital ad for US-based Target while sitting in his Tel Aviv apartment, he knew there was an unsolved problem, so he started DoubleVerify (NYSE:DV), a provider of advertising solutions to businesses that helps with ad verification, fraud prevention, and brand safety.

Two Positive Attributes:

1. Outstanding Retention Sets the Stage for Huge Gains

One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.

DoubleVerify’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 123% in Q3. This means DoubleVerify would’ve grown its revenue by 22.7% even if it didn’t win any new customers over the last 12 months.

DoubleVerify has a good net retention rate, proving that customers are satisfied with its software and getting more value from it over time, which is always great to see.

2. Customer Acquisition Costs Are Recovered in Record Time

The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.

DoubleVerify is extremely efficient at acquiring new customers, and its CAC payback period checked in at 5.2 months this quarter. The company’s performance indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give DoubleVerify the freedom to invest in new product initiatives while maintaining optionality.

One Reason to be Careful:

Cash Flow Margin Set to Decline

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Over the next year, analysts predict DoubleVerify’s cash conversion will fall. Their consensus estimates imply its free cash flow margin of 23.5% for the last 12 months will decrease to 18%.

Final Judgment

DoubleVerify has huge potential even though it has some open questions, but at $20.56 per share (or 4.8× forward price-to-sales), is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

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